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Gold prices firmed on Friday, tracking a rise in both the euro and European stocks after comments from German Chancellor Angela Merkel late on Thursday fuelled expectations for moves to resolve Europe's lingering debt crisis.
The metal remained rangebound, however, and is set to end Friday little changed from a week ago. Platinum prices are up 4.3 percent in that period, on track for their biggest weekly rise since mid-June, after violence closed miner Lonmin's South African operations.
Spot gold was up 0.1 percent at $1,616.45 an ounce at 12:09 SA time, while US gold futures for December delivery were down 50 cents an ounce at $1,618.70. Prices have struggled for traction this week, awaiting direction from policymakers.
Mitsubishi analyst Matthew Turner said he expected gold to hold in its current range in the short term.
“There are quite a lot of events coming up in the euro area, such as the German constitutional court (ruling on the euro zone rescue fund), Spanish bond auctions, the IMF going to Greece, but they're all in September,” he said. “That will be the big month.”
Dollar weakness underpinned all the metals. The euro rose 0.2 percent versus the dollar after Merkel said European Central Bank chief Mario Draghi's pledge to do whatever it takes to preserve the single currency was “completely in line” with the approach taken by European leaders.
Analysts are hoping that the ECB will unveil extraordinary measures, such as bond-buying, to shore up the euro zone. This, combined with expectations that the Federal Reserve will also boost liquidity to fuel growth, has lifted gold this month.
European shares hit a five-month high on Friday, with a key index set to extend its best weekly winning streak in seven years, on hopes the region's policymakers might resolve their differences and work closely to tackle the debt crisis.
German Bunds dipped meanwhile as a rally in European stocks took momentum out of the safe-haven debt market.
“Short-term, we suspect that a hurried round of meetings -all scheduled to take place over the next few weeks - will provide more concrete direction for precious metals,” INTL FCStone said in a note.
“Out of the US, markets will be watching the Jackson Hole meeting of central bankers scheduled for the end of the month, at which point some clarity on the outlook for quantitative easing is expected to emerge.”
PLATINUM HITS 6-WEEK HIGH
Platinum prices extended this week's gains on Friday to climb 1 percent to $1,448.49 an ounce. The white metal earlier hit a six-week high at $1,457.24 after unrest closed all the mining operations of number three platinum miner Lonmin.
South African police opened fire on striking miners armed with machetes and sticks at Lonmin's Marikana platinum mine on Thursday, killing at least a dozen men in scenes that evoked comparisons with apartheid-era brutality.
After over 12 hours of official silence, police minister Nathi Mthethwa confirmed at least 30 men had died when police tried to move 3,000 striking drill operators armed with machetes and sticks from a rocky outcrop at the mine, 100 km (60 miles) northwest of Johannesburg.
Prior to Thursday, 10 people, including two policemen, had died in nearly a week of fighting between the Association of Mineworkers and Construction Union (AMCU) and the National Union of Mineworkers (NUM), a close ally of the ruling ANC.
As South Africa is the source of around 75-80 percent of the world's platinum, any supply disruption there is closely watched for its impact on the market balance. However, weakness in the demand for the autocatalyst metal, particularly in Europe, means it is still forecast to be in a hefty surplus this year.
“While lost platinum production so far does little to put a dent to our estimated surplus of 210,000 ounces, the risk is that the situation starts to infect other major operations in South Africa,” UBS said in a note on Friday.
“If the unrest becomes materially worse from here, there is also the potential of positive government intervention, easing fears which would in turn dampen platinum's... strength.”
“But there are doubts as to whether the government will be able to respond quickly enough, particularly given the politics surrounding the ANC leadership elections in December,” it said.
Among other precious metals, spot silver was up 0.2 percent at $28.24 an ounce, while spot palladium was up 0.9 percent at $584.50 an ounce. - Reuters